Month: August 2018

The Nasdaq led the major indexes this week with an increase of 2.06 percent. SPDR Technology (XLK) returned 1.74 and SPDR Consumer Discretionary (XLY) 1.78 percent with Amazon’s (AMZN) 5.68-percent gain. The stock closed above $2000 for the first time on Thursday and moved higher still on Friday. Amazon is less than 2 percent away from joining Apple (AAPL) at a $1 trillion market capitalization.

Smaller indexes underperformed on the week, with only SPDR Materials (XLB) and iShares U.S. Telecom (IYZ) gaining ground. Energy, utilities and consumer staples declined. Coca-Cola (KO) weighed on staples with the acquisition of Costas coffee chain for $5 billion. The move will put the company in direct competition with Starbucks (SBUX). SPDR Healthcare (XLV) rose 0.97 percent, iShares Nasdaq Biotechnology (IBB) 4.08 percent, iShares U.S. Medical Devices (IHI) 2.33 percent, and SPDR S&P Pharmaceuticals (XPH) 2.27 percent.

The U.S. Dollar Index was flat on the week but gained against emerging-market currencies. The Argentine peso tumbled even after the central bank raised interest rates by 15 percentage points. The Turkish lira also fell again. Indonesia’s rupiah fell to a new multi-year low on Friday. The Brazilian real, however, rallied on Friday ahead of the Supreme Court’s decision on jailed former President Lula expected late on Friday. Their decision could determine whether emerging markets rebound or slump at the start of next week.

SPDR S&P 500 (SPY) increased 1.05 percent on the week. iShares MSCI EAF (EFA) gained only 0.04 percent and iShares MSCI Emerging Markets (EEM) fell 0.46 percent. China was largely responsible for the drop in emerging markets.

Consumer confidence popped in the Conference Board Survey and beat expectations in the University of Michigan survey. The former number was the best since October 2000. The latter was better than expected, but below July’s reading. The University of Michigan survey registered more concern about inflation and trade, but otherwise matched much of the optimism in the Conference Board’s results.

Personal income and consumer spending rose 0.3 and 0.4 percent in July according to the BEA. Core PCE inflation was 0.2 percent, ahead of expectations. The 12-month core PCE has risen 1.98 percent, the highest result since 2.04 percent in April 2012.

Retail earnings were mixed this week. Tiffany & Co. (TIF) beat earnings, but shares were punished due to rising costs. Dollar Tree (DLTR) and Big Lots (BIG) missed and shares tumbled. Best Buy (BBY) and lululemon (LULU), however, solidly beat expectations on Friday. SPDR S&P Retail (XRT) gained 0.33 percent on the week.

The S&P 500, Russell 2000 and Nasdaq all hit new all-time highs this past week. The Dow Transports remains near an all-time high set last week.

SPDR DJIA (DIA) is less than 0.5 percent from a new all-time closing high, while the Dow Jones Industrial Average is about 1.7 percent away.

Technology has powered the week’s advance as Amazon (AMZN) and Netflix (NFLX) lifted consumer discretionary.

Rising interest rates weighed on utilities and consumer staples this week. DowDuPont (DDWP) lifted the materials sector. The telecom services sector’s new ETF from SPDR, trading under symbol XLC also benefited from this week’s rise in technology shares.

Long-term bonds weakened amid rising interest rates this week, but corporate, high-yield and floating- rate funds held steady. The 10-year Treasury yield hit 2.90 percent on Wednesday, the high for the past week. It remains in a trading rate that began in February.

International ETFs did not outperform U.S. markets despite the weaker U.S. dollar. Emerging-market currencies weighed on the rebound in EM shares and the U.S. is more heavily weighted towards tech than most other nations.

iShares MSCI Emerging Markets (EEM) extended its rally over the past week. If EEM can push towards $45 per share, it will break the downtrend that has been in effect since March. That wouldn’t swing the outlook to bullish, but it would mean a new low could take time to materialize. If instead EEM turns lower this week, the downtrend since March is still in effect and a new 52-week low is likely to occur sometime before the end of September.

Global stock indexes broke out of a consolation pattern this week. Emerging markets and to a lesser extent developed markets had weighed on performance, as U.S. markets marched on to new all-time highs. The bounce in emerging and developed markets since mid-August has lifted iShares MSCI All Country World Index (ACWI) out of this pattern. It remains about 8 percent below its January high.

Healthcare has benefited in recent months from the rebound in pharmaceutical shares. SPDR S&P Pharmaceuticals (XPH) still needs to rally 27 percent to exceed its all-time high set in the summer of 2015. Large-cap biotech is closing in on its ATH. Healthcare providers and medical devices (along with the broader healthcare sector) have been setting new ATHs for several years.

The final chart illustrates the impact of pharma on the relative performance of the healthcare sector. SPDR Healthcare (XLV) has underperformed SPDR Technology (XLK) consistently since the sector peaked in 2015.

The Nasdaq climbed above 8000 to another record high on Monday amid a broad rally in stocks. The S&P 500 Index and Russell 2000 Index also closed at new all-time highs. The Dow closed at its highest level since February 2, and just 2 percent from its all-time high. Materials, financials and industrials were the strongest sectors.

SPDR Materials (XLB) advanced 1.35 percent on Monday. DowDuPont (DWDP) gained 2.33 percent. Fertilizer stocks also performed well, led by a 3.31-percent increase in Mosaic (MOS).

A trade deal with Mexico boosted transportation stocks. Railroad Kansas City Southern (KSU) gained 4.68 percent and iShares Transportation Average (IYT) returned 1.11 percent. SPDR Industrials (XLI) rallied 1.20 percent.

Brokerages and investment banks lifted the financial sector. iShares U.S. Broker-Dealers (IAI) climbed 1.40 percent. SPDR Financial (XLF) rose 1.24 percent to trade at its highest level since mid-March.

This week will be relatively light on economic reports. The GDP revision will be out on Wednesday. Economists expect second-quarter GDP growth will be lowered 0.1 percentage points to 4.0 percent. August consumer confidence, July pending home sales and July PCE core inflation are also on tap.

The U.S. Dollar Index weakened by 0.4 percent, the seventh dip in the past eight days. Crude oil rallied towards $69 a barrel on Monday. Foreign shares also outperformed with iShares MSCI EAFE (EFA) climbing 1.38 percent and iShares MSCI Emerging Markets (EEM) rising 1.36 percent.

The 10-year Treasury yield moved higher on Monday, but at 2.85 percent remains near its six-month lows. Odds of a September rate hike hit 99.2 percent.

Retail earnings season winds down this week, but there are still several large chains reporting. Among them are Best Buy (BBY), Tiffany & Co. (TIF), BJ’s Wholesale (BJ), American Eagle (AEO), Dick’s Sporting Goods (DKS), Guess (GES), Chico’s FAS (CHS), Dollar General (DG), Dollar Tree (DLTR), lululemon (LULU), Ulta Beauty (ULTA), Burlington Stores (BURL), Michaels Companies (MIK) and Big Lots (BIG).

Also reporting this week are Salesforce.com (CRM), Brown Forman (BF), Eaton Vance (EV), H&R Block (HRB), Hewlett Packard Enterprise (HPE) and Campbell Soup (CPB).

The S&P 500 gained 0.86 percent this week to close at its first record high since January.  The Nasdaq also hit a new high with a 1.66-percent 5-day advance, and the Russell 2000 Index gained 1.93 percent on the week.

Existing home sales hit an annualized pace of 5.34 million in July. Sales were down 1.5 percent from a year ago. Inventory remains low. Prices have increased 4.5 percent in the past 12 months and the average home has sold within a month of listing. New homes sales remained at the midpoint of the ascending range in place since 2010. July sales were an annualized 627,000.

Weekly jobless claims stayed near four-decade lows at 210,000. The flash manufacturing and service PMIs show robust expansion for August. The final number is due next week.

Federal Reserve meeting minutes show officials are aiming for a September rate hike, consistent with futures market odds. Officials also discussed changing the language in the Fed policy statements from accommodative to neutral. Futures market odds of a fourth hike in December remain in the 65 to 75 percent range seen over the past few weeks.

Crude oil rebounded to $68.72 per barrel this week after a large decline in inventory.

The U.S. Dollar Index snapped a 5-day losing streak on Thursday as emerging markets declined. The Brazilian real fell below $0.25 as speculators moved beyond Turkey. South Africa’s rand also slid after the country’s recent constitutional change that allows the government to seize white-owned farmland. Reports say landowners are being compensated about 10 cents on the dollar. Economic sanctions on Turkey broke that nation’s currency. Speculators are betting South Africa could follow a similar trajectory.

SPDR S&P Retail (XRT) hit a new all-time high this week with solid retail earnings. Target (TGT) headlined the week with a strong earnings beat. Lowe’s (LOW) gained as much as 10 percent after its earnings report before giving back some of those gains. Retail’s strength also lifted SPDR Consumer Discretionary (XLY).

Medical device maker Medtronic (MDT) beat sales and profit forecasts. iShares U.S. Medical Devices (IHI), which counts MDT as its top holding, climbed to a new 52-week high.